Despite Lack of Embassies, U.S.-Libyan Trade Ties Evolve Rapidly by Larry Luxner Thereís no Libyan Embassy in Washington, and the U.S. Interests Section in Tripoli consists of a three-man team operating out of a hotel room. Yet as Col. Moammar Gadhafi remakes his image from international pariah to respected elder statesman, U.S.-Libyan relations are warming up quickly, and the country Qaddafi has ruled with an iron fist since 1969 is looking more and more interesting to potential American investors. Known officially as the Great Socialist Peopleís Libyan Arab Jamahiriya, this oil-rich desert nation is among Africaís largest countries but has only 5.5 million inhabitantsó90 percent of them in the narrow, fertile coastal region along the Mediterranean Sea. Libya has been off-limits to U.S. citizens since 1986, when Libyan agents blew up a Berlin discotheque frequented by American servicemen, and the Reagan administration retaliated by bombing residential areas of Tripoli and Benghazi, killing 101 people, including Qaddafiís adopted daughter. In December 1988, Pan Am Flight 103 was blown up over Lockerbie, Scot land. Four years later, the United Nations imposed sanctions against Libya after Qaddafi refused to hand over for trial two Libyan citizens suspected of involvement in the Lockerbie disaster. In 1999, however, the United States began secretly negotiating with Libya through backdoor channels, and in August 2003, the Qaddafi regime agreed to pay $2.7 billion as compensation to the families of the Lockerbie bombing victims. Libya also formally accepted responsibility for the terrorist attack in a letter to the U.N. Security Council, which promptly lifted all sanctions. On Dec. 20, 2003óas U.S. forces hunkered down in Iraq following their ouster of Saddam HusseinóQaddafi announced that he would abandon all efforts to develop weapons of mass destruction (WMD), leading the Bush administration to finally lift the U.S. travel ban against Libya. In the past six months, the United States has invited the Qaddafi regime to establish an interests section in Washington, just short of a full-fledged embassy, and has authorized U.S. companies with pre-sanctions holdings in Libya to negotiate the terms of their re-establishment in that country. That set the stage for last monthís visit to Libya by a 15-member U.S. business delegationóthe first non-oil group of its kind to travel to Libya in more than 17 years. The delegation flew into Tripoliís old Wheelus U.S. Air Force Base, which was nationalized in 1970 and is today littered with abandoned, cannibalized Soviet aircraft relics. "We were very warmly received," said Mark R. Parris, a former U.S. ambassador to Turkey and leader of the delegation, which was in Tripoli from July 30 to Aug. 2. "Many of the people running the country are U.S.-educated. They speak American-accented English, and they very fondly remember their ties to the United States. Clearly, they were very happy to be re-engaging with Americans. My sense is that they are anxious to renew their old ties and develop business relationships." The history-making trip was organized and sponsored by the Corporate Council on Africa (CCA), a nonprofit trade association headquartered in Washington. It included representatives of large conglomerates such as Raytheon, DaimlerChrysler, Northrop Grumman, Fluor and Motorola. Smaller companies such as Seattle-based Freightliner, Dallas-based Bell Helicopter and J.D. Stark & Associates, a U.S. agricultural company based in Panama, also participated. Parris, who chairs the CCAís Working Group on Libya but had never been to the country before, said he didnít feel he was in a police state. "I didnít get any sense of oppressiveness," he told The Washington Diplomat. "Iíve lived in the Soviet Union, so I know how that can feel. Tripoli is a bright, sunny place along the Mediterranean with beautiful beaches." Although the group didnít meet Qaddafi himself, they did hobnob with key Libyan ministers, and each company representative had a series of private meetings with government and private-sector officials related to their specific interests. The visit also included a mini-conference with about 100 members of the Libyan business community convened by the newly formed Libyan Businessmenís Council. Only in the past year have local private companies been allowed to function openly and normally. "The Libyan leadership recognizes that it made a critical mistake by eliminating the private sector for the past three decades," said Stephen Hayes, president and executive director of the CCA. "There is now greater unemployment among a restive younger workforce. The government cannot employ all its people. Private business must be the engine of economic growth in Libya, as it is in the rest of the world." Hayes has been to Libya eight times, and has met Qaddafi on four of those visits. Although some products still canít be sold to Libya until all U.S. sanctions are lifted, Hayes said huge opportunities exist for U.S. businesses, especially for small- and medium-size enterprises. "Libyan citizens are hungry for U.S. products of all sorts, from agriculture to automobiles," he said. "The sooner all U.S. business can enter into the Libyan marketplace, the better for the workforce in our own nation. Right now is the best time to engage the Libyan economy." The CCAówhose 200 member companies represent 80 percent of all U.S. private investment in Africaóworked very closely with the State Department as well as the Department of Commerce in preparing for the groundbreaking trip. "I think Libya right now is very open to the United States, and we need to take advantage of that for several reasons," Hayes told the Diplomat. "Economically, it provides an opportunity for contracts, which employ a lot of American workers. Itís also in our interest, both domestic and internationally, to look at a new relationship with Libya. You canít forget the past, but how long can you hold onto it?" Especially when youíre talking about a country with petroleum reserves of 36 billion barrels, roughly the same as Nigeriaís. Once full diplomatic and business ties are restored, experts say, Libya could easily rank as the fifth- or sixth-largest crude oil supplier to the United States, after Saudi Arabia, Venezuela, Mexico and Nigeria. "Volumes are significant, Libya has high-quality oil, and thereís also enormous potential in terms of gas exports," said Parris. "So for all of these reasons, it would be a mistake to suggest that Libya is a minor energy player." Despite the sanctions, U.S. oil companies have been able to monitor their investments in Libya through foreign subsidiaries, and Qaddafi never revoked their licenses. At the same time, Libya has freely traded with Europe, and in 2003, the countryís oil export revenues came to $13.4 billionómore than 93 percent of Libyaís total $14.32 billion in export earnings. "The sanctions kept Libya from modernizing its oil sector for many years, reducing their oil output," said Parris. "When you go to Libya, you see the price theyíve paid in terms of development. Now that Libya is essentially free of sanctions, and because it does have oil and gas wealth, youíll see a big boost." Parris, a senior foreign policy adviser at the Washington law firm of Baker Donelson, was U.S. ambassador to Turkey from 1997 to 2000. He was also director of Soviet affairs during the Reagan administration, principal deputy assistant secretary for Near Eastern affairs at the State Department, and a senior director at the National Security Council under the Clinton administration. The former diplomat said Washingtonís change of heart toward Qaddafi has a lot to do with the Libyan dictatorís decision to dismantle WMD. "My own view is that Iraq wasnít the only factor, but it clearly convinced everyone whoís paying attention that the United States is serious about WMD. There seems to be little question that Qaddafi had such programs and that heís working with the U.S. and the international community to definitely and verifiably end them." In March, Assistant Secretary of State William J. Burns gave Qaddafi a letter from President Bush commending Libyaís progress in eliminating WMD. It marked the highest-level meeting between the United States and Libya in decades. How much was Qaddafi really influenced by the U.S. invasion of Iraq? Itís difficult to say, although Parris suspects that recent events in the Middle East had a major impact on Qaddafiís thinking. "One thing Iíve learned in 30 years of diplomacy is that no one case is exactly like another case. Obviously, the Bush administrationólooking at the record on terrorism and weapons of mass destructionóhas concluded that Qaddafi is serious." Parris added, "Sanctions are what countries do when they donít have better options. Itís pretty clear that Libya has an economy where there are limitations on expression. It has been a command economy for many years, but recently Qaddafi has brought in a team whoís advocated a more private-enterprise, entrepreneur-friendly approach." In addition to oil, other promising sectors include agriculture, tourism and telecommunications. Minneapolis-based commodities giant Cargill, for example, recently sold 750,000 tons of wheat to Libya. The country also represents a large potential market for meat and poultry exporters. "Libya today is buying $100 million worth of corn oil annually from European suppliers. Americans can probably provide that cheaper. We do corn real well," said Parris. "Thatís just one concrete example. Libya subsidizes edibles for their population, and they tend to pay cash for those commodities because theyíre cheaper that way." Asked about the preponderance of defense contractors on the trip, considering the fact that Libya remains on the State Departmentís list of countries that sponsor terrorism, Hayes said those companies "do a lot of things besides defense." For example, Raytheon owns Beechcraft, which manufactures small planes that can be used in oil pipeline surveillance. In addition, Libyaís director of civil aviation is talking about rebuilding four or five airports and buying American navigational equipment and radar, which is allowed under U.S. law. Thereís also interest in purchasing U.S. infrastructure for mobile-phone networks. Tourism is another area for potential U.S. investment. Hayes said that despite Libyaís 1,200 miles of undeveloped, unspoiled Mediterranean coastline, there are no decent beach hotels, and only two good luxury hotels in Tripoli. Libya boasts some of the best-preserved Roman ruins in the world, and the fact that the North African country has been off-limits for so many years lends a certain forbidden appeal to Libya as a tourist destination. Yet certain stumbling blocks remain, including the issue of Qaddafiís long-time hostility toward Israelónot to mention the Arab worldís efforts to boycott Israeli goods as well as companies that do business with the Jewish state. "Americans who have traveled to Israel have also traveled to Libya even though they have Israeli stamps in their passports," said Parris, who for a time was the number-two diplomat at the U.S. Embassy in Tel Aviv. "Libya still nominally adheres to the Arab boycott of Israel. One of the issues that will have to be resolved is whether U.S. companies that want to do business there will have to conform to the boycott." If they do, he said, that would be a violation of U.S. law. A bigger question is what will happen with regard to U.S. policy toward Libya in the event Sen. John Kerry wins the November election. "What I do sense, talking to the administration, is that this is a presidential policy, not a State Department policy, and if Bush is re-elected, this will be part of his legacy. It doesnít mean that the U.S. will give Libya a free ride, but it does mean that itís not likely to grind to a halt by bureaucratic inertia on our side," Parris said. "If Kerry is elected, will the script change? I tend to think it wonít." Larry Luxner is a contributing writer for The Washington Diplomat.